Business Restructuring– Clock is Ticking, Tic, Tic… Is It Your Time? Leaders Ultimate Challenge– Transformative Change…

Business restructuring is the process of redesigning, realigning, reorganizing… so as to position the business to be more competitive, survive adverse economic conditions, and also to move the business in an entirely new direction… No business can continue to function in the same way, forever. With changing times and changing business conditions, restructuring is one of the options for a business…

According to Charles Goldstein; for many businesses restructuring is the best option – and sometimes the only viable one – for a business that has taken too many hits from extended difficulties... But even in the best of times, it’s important to be proactive, to constantly monitor not just your company’s performance, but also the health of– workers, competitors, markets, customers, vendors, lenders…

But most important, business must have a recovery strategy ready even before it actually need one– it’s twice as tough to come up with viable alternatives when you are in the midst of crisis… According to Gary Rushin; distressed business symptoms often occur well before crisis hits… and before it’s known, the business is in a death spiral… but, the situation is not inevitable and, in many cases, it can be stopped, reversed… but, timely action is critical... It’s been learned that the best way to restructure a business is to study failures…

Often, companies that once dominated their markets later slide into distress… they lose their touch– the ‘mojo’— that once created their success… These company, often times, create an over-confidence bias– they become so self-assured that they think they don’t need to change anything…

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In the studyBest Practices in Corporate Restructuring’ the question was asked: How successful has business restructuring been in achieving stated goals? The responses from executives at 531 companies reported mixed results:

  • 90% said reducing cost was a goal, and only 61% felt they achieved the goal.
  • 85% stressed increased profitability, but only 46% reported increased profits.
  • 64% believed restructuring would increase their competitive advantage, but only 32% found this to be true.
  • 58% wanted to increase productivity, but only 34% saw it happen.
  • While 58% also wanted to see improved customer satisfaction, improvement occurred only 27% of the time.

Besides showing business restructuring has earned a spotty success, the study results also indicated that executives want to treat business restructuring as a panacea. Not only do a majority of executives expect business restructuring to reduce costs, increase profits, achieve competitive advantage… they also want it to increase productivity and improve customer satisfaction…

When a tool like business restructuring is treated as a panacea it’s because there is no clear understanding of– how, where, when, why– to use it. According to Robert J. Ellis; perhaps one of the important lessons from corporate restructuring is the need for clear picture of what the ‘end business’ will look like before the restructuring process begins… Failure to take this first essential step leads to many problems– not the least of which is asking workers, stakeholders… to set a journey without understanding the destination…

For decades, strategic thinking focused on answering three basic questions: Where are we? Where do we want to go? How do we get there? But, Mr. Ellis suggests that corporate restructuring must be more strategic… Too often, corporate restructuring focus on– ‘how to do something’ more efficiently without determining– ‘what is most important to do’… and often too much of the restructured work is strategically unimportant…

According to Alfred Chandler; it’s critical that leadership answer the question: Why are we doing this? Leaders must articulate a clear business strategy, and educate their workplace on why changes are critical to the future success of the business… Moreover, before management can determine how to work better or how to organize to perform business processes more efficiently, they must first determine– what work needs to be done and what processes are critical to perform… choices can only be made when a clearly articulated business strategy exists…

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In the article Strategic Planning to Restructure Your Business by Lloyd Russell writes: Business restructuring usually accompanies negative connotations of inefficiencies or a need to cut the workforce to improve the bottom line… However it’s important to balance this with the premise that a business restructure is a process to renew the business and position it in a manner to exploit market opportunities…

History indicates that most restructures are poorly developed and implemented for three main reasons – (1) Cost cutting is the main focus… (2) There is a focus on people rather that positions and the strategic direction of the business… (3) There is no clear strategic purpose and a lack of communication… Here are some guiding principles that will help focus the restructuring process:

  • Strategic Planning Before Structure: Business must have a clear and realistic strategic direction to focus efforts of the workforce, management, stakeholders… Most will embrace the change if they can clearly see where the decision-makers are taking the business…
  • Reduction of Clutter and Complexity: Business must mitigate the negative impact of complex organization structures… Design business structure and strategic positioning before you concentrate on personnel… Simplify leadership roles through clear and efficient processes including; clear audit trails… Keep organizational structures flat…
  • Core Competencies and Activities: Prior to developing roles and responsibilities– gain a clear perspective on the core activities that defines the business– identify the core competencies that are main drivers of the business activities… It’s essential to reinforce these activities that add most value to the business… and other less important activities that don’t add value should be removed…
  • Feasibility of Positions and Roles: In the majority of business restructures cost cutting is the main objective, and for some positions, roles… they are unrealistically loaded with duties that are not aligned to the strategic direction of the business… While it’s essential to have all resources working close to capacity they must be working towards the same defined goals and objectives of the business… otherwise inefficiencies occur and performance measurement is impossible…
  • Balance Within Management Workloads: The management functions are a blend of management and leadership. If the people within these positions are overloaded they tend to focus on the urgent management tasks that are directly related to the visual desired outcomes… To assist in maintaining the correct management work balance, these elements are critical; numbers of employees under direct management, ability of employees to perform tasks without supervision, level of ‘functional’ work manager must perform– other than workplace supervision…
  • Effective Implementation: The critical time for the successful implementation of a restructure is within the first six weeks. If the workforce is confused about the direction of restructure, there will be an adverse impacted on the implementation. A successful implementation process starts with clarity of positions, roles and responsibilities, and clear identification of all functions within the business, including; activities, tasks and level of authority for decision-making… All employees must understand where they fit for the efficient operation of the business. Finally, everyone must understand what they are accountable for and how this will be measured…

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In the article Success Restructuring Follows Strategy by Lee Tom Perry writes: Business restructuring is becoming more common place– not only is it affecting more businesses, it’s affecting businesses in more ways… Restructuring promises to remove people and functions that don’t add value to the business… Businesses that begin restructuring with a clear strategic understanding are far more likely to attain desired results… An approach to strategy formulation that offers a useful guide for corporate restructuring is the business-focus approach, which is based on two assumptions about strategic direction:

  • There are basics ‘competitive necessities’ that every business must get right, just to keep up with industry competition. Strategies that focus on ‘competitive necessities’ can create temporary competitive advantage, but this strategy is better for catching-up with competitors than for staying ahead of them…
  • Businesses that aspire to become competitive leaders must do more than perform the basics, well– They must truly distinguish themselves are those that have a ‘business focus’, and that enables them to excel at ‘something’… Businesses are excellent only when all workers, stakeholders… know and understand– what business they are in, and everyone pulls together to make the business work…

A business focus defines how a business intends to use its unique capabilities to sustain competitive advantage. A business focus directs organizational efforts and development of individual and team capabilities, which facilitates the building distinctive competencies… Businesses that achieve strategic clarity have the advantage of not only being able to restructure strategically, but also communicate the actions that flow from the strategy in a way most people understand…

Generally, workforce is more committed to restructuring when they have a better understanding of the reasons behind it… Strategy clarification sets the stage for strategic restructuring by providing a logic for prioritizing organization work. When the business strategy is clear– it’s possible to answer questions, such as: What work must be the object of the most intense improvement efforts? What work activities must be improved? What work must be eliminated? What work must be outsource? What are the most useful drivers for improvement? Most businesses that are successful at restructuring are able to identify and protect the core work processes that create competitive advantage, or distinctiveness to their industry…

The essence of business restructuring is leadership, which means the communication of clear vision for where the organization wants to go… and commitment, persistence for getting there… while not destroying the spirit and values of the organization for which it stands. Leadership cannot abdicate the responsibility for defending strategic restructuring initiatives against the unrelenting waves of resistance to change…

According to Ilya Pozin; divisions, departments, management hierarchy.. they’ve all lost their purpose… it’s not important who’s doing the work, titles… All that really matters is that the work gets done. If you run a factory, hierarchy may still have a place but if you run a company that requires problem-solving skills, creativity, high level of motivation for workers, then consider flattening, flipping– the organization chart… Promote a culture where workers, customers… are the top priority.